Monday, December 6, 2010

Tops, Elliott Wave and Stuff

Starting to feel like Bob Prechter in the '90's...All Bear All the Time. And all the old sayin's like "a bull market climbs a wall of worry" and " buy a market that goes up in the face of bad news" are runnin round my head.
Problem is: I hate buying a market that is being supported by only one factor, even if it is the Fed;

From the 60 Minutes interview with Ben;
Q: How would you rate the likelihood of dipping into recession again?

A: It doesn’t seem likely that we’ll have a double dip recession. And that’s because, among other things, some of the most cyclical parts of the economy, like housing, for example, are already very weak. And they can’t get much weaker. And so another decline is relatively unlikely. Now, that being said, I think a very high unemployment rate for a protracted period of time, which makes consumers, households less confident, more worried about the future, I think that’s the primary source of risk that we might have another slowdown in the economy.
Q: You seem to be saying that the recovery that we’re experiencing now is not self-sustaining.

A: It may not be. It’s very close to the border. — it takes about two and a half percent growth just to keep unemployment stable. And that’s about what we’re getting. We’re not very far from the level where the economy is not self-sustaining.

(I love that first response;   so glad there won't be a double dip.)

Plus there's the little issue of all this commodity froth being assisted by the last great bubble of the post modern era..see China's credit bubble on borrowed time as inflation bites from Ambrose Evans-Pritchard and RBS.

Meanwhile WTI Crude hits the 50% retrace point at 89.76


click to enlarge
Note the negative divergence on the RSI (so far)
Intermediate term;                                               Jan  Daily
 click to enlarge
Again note the RSI divergence.
Here the Z = .618 of the Y, and the Y= 2x the W.
The legs labeled wyz are clearly abc structures that are related by Fibonacci ratio's.

The SP came very close to the .618 retrace of the entire move down from 1578 to 666 @ 1229, hitting
1227.75 or .616

Can it continue to go higher? WTI at the .618 retrace say of $103 ? Or SP's at 1339; the .76 retrace?
Sure, Elliott .618 retracing of waves are absolutely common and usually expected. But given the jobless recovery and the Fed 's justification of QE2 policy, erring on the side of caution against todays significant Fibonacci points makes sense.







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